SINO - an excellent article by Andrew Hecht (over 9300 followers) at S.Alpha this morning about how the seasonality of the BDI means that the Feb 14 low is in-- this bodes very well for SINO's shipping sector. Maybe we see a fantastic run-up like last Nov?
Note that today's BDI reading has jumped up another 40 points to 979! (Much higher than the level when Hecht submitted his article). http://www.dryships.com/pages/report.php
[Here are some relevant paragraphs from the article:]
As the chart of the BDI highlights, the index fell from 1257 on November 18 to lows of 688 on February 14, a decline of over 45% in less than two months. There were two reasons for the decline. First, it is likely that over-exuberance over the potential for increasing demand for dry bulk commodities lifted to index to highs that were unsustainable. Second, and perhaps more importantly, is the seasonal nature of the BDI.
The bulk of shipping activity takes place in the Northern Hemisphere. With China and the rest of Asia so important to commodity demand and in the Northern Hemisphere, February tends to be a slow shipping month because of adverse weather conditions and rough seas. In 2016 the lows came on February 11 and in 2017 on February 14. As the chart shows, the BDI has picked its head up and come storming back after the most recent lows and was trading at the 859 level on March 1, around 25% above the lows made just over two weeks before. Seasonality and over-exuberance were the likely reason for the lows and the snap back is a sign of strength for commodity prices.
Watch the index for clues Commodities prices are an excellent real time guide for economic growth and inflationary pressures when it comes to the global economy. Many analysts watch oil, copper, steel and other raw material prices to forecast economic growth or contraction. The Baltic Dry Index also is an important harbinger of trends in the global economy and it can be very volatile as we have seen over the past year. The index rallied from an all-time low of 290 to 1257 back down to 688 over the past year and up to 875 over the last two weeks. Watch this index for clues when analyzing economic trends and forecasting economic activity in the commodities sector. The BDI offers a guide to the current levels of freight rates which tell us if demand for raw materials is moving higher or lower around the world. It is useful as a critical input in all investment calculus.
I believe that we have seen the lows in the BDI for 2017 and the level of the index will be back above the 1000 level soon. With inflation on the rise according to the U.S. central bank, activity in the industrial commodities sector is likely to continue to be buoyant throughout this year.
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